2017-06-05

Why There Will Be Financial Collapse

I have to confess a personal bias that is opposite his—i.e., I'm inclined to optimize for the whole through cooperation in order to make the pie bigger, and then cooperatively and competitively divide up the pie. I believe that we are connected to our whole ecology, our whole world community, and our whole United States, such that it pays to be in symbiotic relationships with them—so, I'm concerned about his path. I am especially concerned about the consequences of his pursuing so much conflict. At the same time, I see some encouraging moves on his part (e.g., to pursue public-private partnerships to rebuild infrastructure).

Conflict is coming because social mood is falling. Most of the global elite are betting on increased cooperation, they retain peak social mood attitudes because it is profitable for them. This is why they fight so strongly against nationalism and identity: it is in their financial interests to do so. But as Dalio noticed earlier, if we look at mood it is way out of whack with the financial markets because this is a bear market rally within a much greater decline in social mood. Attempts to increase inclusion intensify violence and conflict. Attempts at cooperation highlight the dividing lines within society. For instance, here are blue states implementing secessionist policies. NYTimes: Bucking Trump, These Cities, States and Companies Commit to Paris Accord

Representatives of American cities, states and companies are preparing to submit a plan to the United Nations pledging to meet the United States’ greenhouse gas emissions targets under the Paris climate accord, despite President Trump’s decision to withdraw from the agreement.

The unnamed group — which, so far, includes 30 mayors, three governors, more than 80 university presidents and more than 100 businesses — is negotiating with the United Nations to have its submission accepted alongside contributions to the Paris climate deal by other nations.

This is fundamentally happening for the same reason Scotland is breaking away from the UK, and Catalonia from Spain: there is a supranational organization. But it is also happening because mood is negative at home. The lines of cooperation and conflict are being redrawn.

Stock markets are at new all-time highs, but other economic indicators such as credit growth show the economy is more aptly described as being in a depression. It is possible the economy and social mood correct and converge with stock prices, but given the power of perception in markets, it is more likely the equity markets will converge with the broader mood. Wealth is concentrated among elites who still have positive mood and are relatively unified. Their political projects are facing increasingly intense opposition in democracies because they are out of step with the social mood. Eventually, their investments will follow.